Question

A social scientist would like to analyze the relationship between educational attainment (in years of higher education) and annual salary (in $1,000s). He collects data on 20 individuals. A portion of the data is as follows:

Salary	Education
34	3
66	1
89	4
56	3
71	7
80	2
111	7
51	0
23	7
36	2
100	1
35	1
71	6
68	9
163	5
56	0
86	5
58	4
128	9
33	0

a. Find the sample regression equation for the model: Salary = β₀ + β₁Education + ε. (Round answers to 3 decimal places.)

Salaryˆ=Salary^=    +   Education

b. Interpret the coefficient for Education.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $4,689.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $4,689.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $8,590.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $8,590.

c. What is the predicted salary for an individual who completed 7 years of higher education? (Round answer to the nearest whole number.)

SalaryˆSalary^               $

Answer 1

Regression equation Salary = 52.9318 + 4.6890 Education

b) As education increases by 1 unit an individual salary is predicted to increase by $4689

c) Given, education = 7

Salary = 52.9318 + 4.689*7 = 85.7548 = $ 85754. 8 = $85755